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Burns Charest LLP Client Challenges $8.4 Billion in Transfers to Protect $225 Million Claim

On behalf of its client, Whitton Petroleum Services Limited, Burns Charest LLP has filed an adversary proceeding in the Cobalt International Energy bankruptcy proceeding to protect Whitton’s pending $225 million claim. In the action, styled Whitton Petroleum Services Limited v. Tavakoli, Plan Administrator (In re: Cobalt International Energy, Inc.), Case No. 17-36709(MI), Adv. No. Adv. No. 18-03172, Whitton challenges the characterization, in the Cobalt bankruptcy plan, of both $6,016,200,407 as an intercompany payable and $2,443,503,196 as an intercompany receivable.

The adversary proceeding came in advance of a bankruptcy court-approved $500 million payment, that took place on June 29, 2018, for Cobalt assets including the sale of three blocks off the coast of Angola from Cobalt to Sonangol, the Angolan state-run oil company. According to a bankruptcy court order, that payment, which has occurred, and the subsequent asset transfer would trigger Whitton’s claim to payment under a pre-bankruptcy agreement. Whitton has filed a proof of claim for $225 million. But the plan’s treatment of the intercompany transfers would threaten Whitton’s ability to recover under the plan.

“In effect and by design, the proposed treatment under the plan would wipe out Whitton’s $225 million claim,” said Daniel Charest, Whitton’s trial counsel. “Fortunately, the law protects us in this situation. We expect the bankruptcy court to reject the plan’s unsupported characterization of these transfers and credit Whitton’s claim.”

Whitton is represented by Daniel Charest and Mallory Biblo, of Burns Charest LLP, and John Higgins, Heather K. Hatfield, and Samuel A. Spiers, of Porter Hedges LLP.